In Tanzania, the calculation of the corporate income tax (CIT) base allows tax losses to be carried forward for an unlimited period. Then, they can be deducted from the taxable profit of subsequent years to reduce the CIT base. However, restrictions exist to limit the tax base erosion. Since 2008, a company that carries forward losses over three consecutive years has been required to pay an alternative minimum tax. Initially set at 0.3%, since 2018 this minimum is 0.5% of the company’s turnover.
Moreover, since 2020, Section 31 of the Finance Act (Act No. 8 of 2020) adds an additional restriction. A company that carries forward losses for four consecutive years can no longer reduce the tax base before loss carry forward by more than 70%. Losses can still be carried forward without any time limit, but only up to a limit of 70% of the tax base. Such a company must therefore pay at least 30% of the CIT that would have been due without the loss carry forward.
Would you like to learn about the taxation of the mining sector in Africa and learn how to model mineral resource rent sharing? In partnership with the French Ministry of Europe and Foreign Affairs (MEAE), the IHEDD is opening a new session of its online training on modeling and mining taxation in Africa.
This distance training will take place from January 15 to February 5, 2021. It will require approximately 25 hours of work on your part. In addition, you will benefit from a personalized follow-up from the various trainers. Apply before December 7, 2020. The price is 450 euros. A MEAE scholarship may be granted upon selection of applications. Only 30 places are available.
Simulations are now available for the year 2019. These simulations make it possible to estimate the mineral resource rent sharing accruing to the State, i.e. the average effective tax rate (AETR), by applying a country's tax legislation to a mine representative of African gold mines.
Of the 22 countries in the sample, 6 experienced a change in their AETR in 2019. In Benin, Chad, Cote d'Ivoire and Mali, AETRs are increasing. While in Mauritania and Zimbabwe, AETRs are declining. However, variations in AETRs are fairly small, except in two countries where they may be particularly large. In Cote d'Ivoire, the elimination of the corporate tax exemption and the minimum tax exemption leads to an increase in the AETR of up to 8.6% for a high-grade mine and a price of gold set at $1,500/oz. In Zimbabwe, the introduction of a variable mining royalty rate based on the price of gold decreases the AETR by up to 26% for a low-grade mine and a price of gold set at $1,100/oz. Note that in Gabon, the coming into force of the new mining act did not result in a change in the AETR because mining taxation remained virtually unchanged.
Updated tax data for 2019 are now available for Nigeria, Sierra Leone and Tanzania.
In Nigeria, mining taxation has not changed. In Sierra Leone, taxation has also not been amended either (Finance Act, 2019, No. 2 of 2019). In Tanzania, the new version updated to 2018 of the mining act has been published (Mining Act, 2010, No. 14 of 2010, amended by Finance Act, 2018, No. 4 of 2018) and the withholding tax on income from the sale of mineral has been repealed (Written Laws (Miscellaneous Amendments) (No. 2) Act, 2019, No. 6 of 2019).
The mining sector is an important contributor to tax revenues in many African countries. In 2015, the extractive sector accounted for more than 20% of the total revenues of nine countries on the continent. Mining tax systems must then both attract investors and ensure sufficient revenues for governments. Following the increase in commodity prices in the second half of the 2000s, most African countries reformed their mining laws in order to capture a larger share of the rent generated by mining companies. This trend continues: mining royalty rates are rising, mineral resource rent taxes are reappearing, and free equity for the state is becoming more and more common.